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Gordon Brown - how do you kickstart the housing market? Ask the experts!

publication date: Apr 1, 2009
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Gordon Brown Propertydrum Magazine


INTRODUCING OUR PANEL OF 
EXPERTS FROM THE UK PROPERTY INDUSTRY


Robert Jordan
Robert Jordan, Chairman, Jordan’s
“The most pressing issue is to kickstart the housing market. In times of economic difficulty the property market is the engine that will drive activity back into the market. The Barker Review of Housing Supply in 2006/7 concluded that the reason house prices were going up so fast was because of the massive shortage of homes for people to buy. 

"As a result, the Government called for 20,000 more homes to be built by 2020… and that’s when it all started to unravel and the market started to collapse. There are grave implications of a deteriorating housing market for the wider economy. The housing market supports not only the house building sector but a whole raft of professionals from financial institutions to removal firms, carpet retailers and fitters, fitted furniture and white good retailers, not to mention the construction sector. 

"There has to be a halt to house price reduction and a return to a market where prices are flat or, preferably, growing at a small percentage rate each year. Some house price inflation is good for the economy; after all, if something is going to cost more tomorrow then buy it today. If the reverse is the case, the market stagnates; as it is at present. 

"The Government has to recognise the harm the current downturn and rapid reduction in house prices is having on potential first time buyers and homeowners who will have used their home as collateral for debt, a mortgage or to support a business loan. Many first time buyers have now been put off buying their first home, placing significant pressure on the private rental sector as well as social housing provision.” 


LOOSEN THE LENDING 
The Government has so far invested £37 billion into bailing out the banks, yet there is still nothing in place that requires them to start lending again. They seem to have taken the money but maintained a fatally cautious position.
James Scott-Lee RICS
James Scott-Lee, RICS spokesman

“We have seen as many people looking to buy this year as in 2008. The number of properties coming to the market does not match that demand. So why so few sales? The problem is a lack of availability of funds to borrow. The state-owned banks must now step up to the plate and do what the Prime Minister has been saying they must do for months and make mortgages available to all who have 15 per cent or more deposits.” 


Lloyd Davies Convey Group
Lloyd Davies, Convey Group

“While a step in the right direction, as with all of these measures it will be interesting to see whether the banks actually start lending again. Adding a Stamp Duty holiday would be a positive move, freeing up cash from homebuyers, improving loan to value rates and opening up additional mortgage products. But in the longer term, we need to see a better response from lenders. The latest RICS figures show that demand for property is there, it is a lack of funding that causes most cases to stall. Those of us working in the property sector are increasingly frustrated to see so many deals fall through due to lack of credit.” Lloyd Davies, Convey Group


Simon Agace, Winkworth Chairman
Simon Agace, Chairman, Winkworth

“Government incentives to increase lending could cause a re-emergence of first-time buyers. However, this depends on whether a 90 per cent mortgage is truly 90 per cent of purchase price, or if valuers discount the agreed price, making the mortgage more like 80 per cent. As the market firms up, this will frustrate first-time buyers who will be faced with having to bridge the gap with cash. Whilst it’s exciting to hear that there’ll be 90 percent mortgages, agents will wait to see the reaction of valuers to the firming up of the market before they will believe that this type of mortgage is truly obtainable.” Simon Agace, Chairman, Winkworth


Aaron Turner, look4property 
Aaron Turner, www.look4aproperty.com

“I call on the Government to introduce strict guidelines to ensure the injection of money into the economy reaches the people who need it most. I welcome quantitative easing but the UK must not make the same mistakes as Japan, with banks sitting on the cash. This money and the rate cuts are welcome and desperately needed by British businesses and borrowers, but if the Government does not ensure the money gets to them it will have been a wasted exercise.” Aaron Turner, www.look4aproperty.com

THE GOVERNMENT GUARANTEE 
The Government is considering forms of guarantee – do the experts agree?

Andrew Turner, Head of Residential Agency, Smiths Gore
“Alistair Darling needs to introduce a Government-backed loan scheme specifically for first-time buyers, providing discounted rate funds to use for the deposit on a house only, up to 25 per cent of a property’s value. This would allow first-time buyers access to mortgage funding at the more reasonable rates available at 75 per cent – 80 per cent loan-to-value as opposed to the significantly higher rates demanded by lenders at 90 per cent or 95 per cent loan-to-value. A Government-backed loan scheme would underpin the property market in the UK by introducing fresh blood.” Andrew Turner, Head of Residential Agency, Smiths Gore. 

Robert Jordan, Jordan's
“The banks and mortgage companies should provide 90 per cent loans on the property and 15 per cent of the loan guaranteed by the Government for three years.” “Alistair Darling needs to introduce a Government-backed loan scheme specifically for first-time buyers, providing discounted rate funds to use for the deposit on a house only, up to 25 per cent of a property’s value. This would allow first-time buyers access to mortgage funding at the more reasonable rates available at 75 per cent – 80 per cent loan-to-value as opposed to the significantly higher rates demanded by lenders at 90 per cent or 95 per cent loan-to-value. A Government-backed loan scheme would underpin the property market in the UK by introducing fresh blood.” Andrew Turner, Head of Residential Agency, Smiths Gore.


Lee Watts, Kinleigh, Folkard, Hayward
Lee Watts,  Managing Director, Kinleigh Folkard & Hayward 

"Firstly, the Government should look to control lending to a maximum of 95 per cent loan-to-value, and in addition, introduce government backed Mortgage Insurance Guarantees for the top 15 per cent of lending over 80 per cent. This will encourage lenders to improve the range of products and rates available.” Lee Watts, Managing Director, Kinleigh Folkard & Hayward


STAMP OUT THE DUTY AND FLIP THE HIP
Stamp Duty currently stands at one per cent for homes valued between £175,000 and £250,000, rising to three per cent for properties from £250,001 to £500,000 and four per cent for properties over £500,001. Would an adjustment help?


Richard Barnett Litchfields
Richard Barnett FNAEA, Managing Director, Litchfields, North London 

“Stamp Duty thresholds should be increased, the recent increase to £175,000 where no stamp is paid has done absolutely nothing, £250,000 should be stamp-free. The other bands should be looked at too, even reducing the percentages for a limited time. More grants should also be readily available and easily accessible for making properties more energy efficient.” Richard Barnett FNAEA, Managing Director, Litchfields, North London

Lloyd Davies, Convey Group 
“The Government could put confidence back by extending its Stamp Duty holiday to all homes under £250,000 and reducing the cost of Stamp Duty to one per cent for all properties over £250,000. However, they could really boost the market by permanently scrapping Stamp Duty for properties under £250,000 and reducing the cost of Stamp Duty to one per cent for all properties over £250,000. Unlike the cut to the VAT rate, this could make a material difference to families that are looking to move, removing one of the barriers that face them.” Lloyd Davies, Convey Group

Andrew Turner, Head of Residential Agency, Smiths Gore 
“I recommend abolishing Stamp Duty on all houses valued at less than £1,000,000 for 18 months and further delay the introduction of HIPS at the point of marketing for the same period. By removing these shackles, potential vendors would be tempted to take advantage of falling interest rates and the middle market could make a resurgence.” Andrew Turner, Head of Residential Agency, Smiths Gore 


Trevor Abrahmson, Glentree Estates
Trevor Ambrahamson, Glentree Estates
“The bureaucratic idiots that devised HIPS now (from April 6) insist that the HIP be fully in place on the first day of marketing, making the sago pudding that is conveyancing even thicker than ever. Equally unnecessary are EPCs; nobody wants them, nobody cares, nobody likes paying for them Useless nonsense! We have always sold houses quickly by getting all the appropriate information prepared before marketing. This is common sense. You have listed building consents, plans, questions etc all in place so that when a buyer says ‘yes please’ you can proceed. Our sales can, if required, be completed within one hour because everything is ready. Preparation stops gazumping, stops gazundering, stops buyers and sellers getting bored and pulling out. You do not need a HIP to do that, you just need to do your job.” Trevor Ambrahamson, Glentree Estates, London NW11 

Ivor Dickinson, MD, Douglas & Gordon 
“The Government needs to abolish, or significantly raise the bottom band of Stamp Duty. Incentivising the market by removing Stamp Duty on properties less than £250,000 is one way to kickstart the bottom end of the market which is essential to get the whole thing moving again. In the boom years, wealthy buyers were pulling the market up from the top end, but then the chord was severed leaving the market very vulnerable.” Ivor Dickinson, MD, Douglas & Gordon 

Lee Watts, Kinleigh Folkard & Hayward 
“The Prime Minister might consider putting the final nail in the coffin of the ill-advised HIP. These are of no benefit to the sales process and just slow the whole thing down. Buyers are not interested in them while they are looking for a new home, and they are an unnecessary expense for vendors trying to sell their home.” Lee Watts, Kinleigh Folkard & Hayward 

David Adams, Head of Residential, Chesterton Humberts 
“Chesterton Humberts has seen a surge of offshore buyers in recent months, but the key to a full recovery is increasing the availability of financing. Mortgage lending remains at an historic low, with banks avoiding lending by down-valuing properties when buyers apply for finance. A major economic issue is the extortionate level of Stamp Duty charged. It is not fair to ask buyers with young families to find an additional £40,000 in tax to upgrade to a house. Now that interest rates are at an historic low, the Government and banks must increase lending and reduce the cost of buying. We are seeing strong demand for property, with viewings and offers up substantially from last year but this will not translate into sales until the lending and tax issues are resolved.” David Adams, Head of Residential, Chesterton Humberts 

David Borrowman (Partner) Caesar & Howie, The Central Scotland Law Group 
“The Home Reports legislation in Scotland came in to force on the 1st December and since then listings on the market have slumped dramatically (over 50 per cent). Before, you could go on the market cheaply and quickly. Now it is expensive and slow and this has put huge numbers of buyers off – as well as causing problems for sellers in financial distress. The Scottish Government might just have read the report by Sir Bryan Carsberg on the English market which highlights the unnecessary expense and general unpopularity of HIPs. For Scotland to follow suit in this climate was simply an act of economic vandalism. A solution for Scotland would be for the £500 fine for marketing without a Home Report to be ditched. Houses would then come back on the market in numbers to coincide hopefully with the increased supply of mortgages. The market would then pick up quickly since the desire to buy is still there.” David Borrowman (Partner) Caesar & Howie, The Central Scotland Law Group 

A RETURN TO MORTGAGE INTEREST RELIEF? 

Lee Watts, Managing Director, Kinleigh Folkard & Hayward
“Back in his Chancellor days, in 2000, Gordon Brown made a huge mistake when he scrapped the ‘middle class perk’ of MIRAS. In the current market, the re-introduction of Mortgage Interest Relief At Source, for first time buyers only, would go a long way to relieving the difficulties faced by those trying to buy their first home.” Lee Watts, Managing Director, Kinleigh Folkard & Hayward Richard Barnett FNAEA, Managing Director, Litchfields “I would strongly recommend the Government to reintroduce MIRAS which was originally conceived in the 70s to reignite the housing market. It proved very successful and was eventually phased out at the end of the 80s. Then it was £30,000 per person, now it should be at least £100,000. I would also give it a limited time frame.” Richard Barnett FNAEA, Managing Director, Litchfields 


IS THE MARKET BOTTOMING OUT? 


Tom Parker, Quest
Tom Parker, Managing Director, Quest 
“I believe that the housing market will not recover until we get to the bottom of the house price falls and, to that end, we must stop talking of green shoots and instead talk about a realistic bottom of -30 per cent from peak. At the recent CML conference the opening speaker and others talked of a drop of over 40 per cent but I believe if everyone talks of a 30 per cent drop now we will get there quickly and then will be the time to talk the market up from a realistic bottom as nobody sensible is going to invest into a declining market.” Tom Parker, Managing Director, Quest

THE FIRST TIME BUYER'S GIFT

Robert Jordan, Jordan's
“The Government needs to introduce more initiatives for first-time buyers to help them onto the property ladder. An idea would be to provide first-time buyers with a ‘gift’, never to be repaid, of up to £10,000 or five per cent, whichever is the lesser of a property purchase; with the purchaser to find an equivalent amount. £1bn will support 100,000 house purchases!” Robert Jordan


BUY TO LET

A modern cornerstone of the UK housing mix, introduced with all the finest intentions, tremendously successful for nearly 15 years, until greed – on the part of some ‘get rich quick’ inexperienced investors and over eager lenders – tarnished its name, Buy To Let still has an extremely important role to play. 

Robert Jordan, Jordan's
“The Government must, as a priority, insist that banks and lending institutions lend up to 85 per cent on mortgages to landlords for buy to let property, which must be let and available to be let for at least five years. ” Robert Jordan   

JOIN THE EURO! 

Achim Amann, Director, Simplyzigzag.com
“Now is the time for bold moves from Gordon Brown. The UK should join the Euro and focus on a closer relationship with France and Germany. Even though this might be considered as political suicide for the party it would do our economy a massive favour.” Achim Amann, Director, Simplyzigzag.com 

THE LAST WORD...

Trevor Ambrahamson, Glentree Estates
“We have big problems to come in housing shortages. We have not been building anything like enough homes and now we are not building any at all. So demand is going to increase and, because all the inflationary tools are now pumping at maximum throttle (super low interest rates, huge government borrowing, quantitative easing), we will have massive inflation and house prices will rise dramatically.” Trevor Ambrahamson, Glentree Estates, NW11

IT'S SPRING! ARE THERE ANY GREEN SHOOTS?

Boris Johnson’s low-cost home ownership initiative 

Spring has, traditionally, heralded the annual rebirth of the housing market. It’s wonderful to move into your house for Easter, the warmer weather encourages evening viewings and fun weekends spent nosing around peoples’ houses. But what of this Spring? Is it happening or has the lack of useful activity in the corridors of power caused the continuation of the frozen market?


Boris Johnson, Mayor Of London
The Mayor of London has been busy planting seeds. Boris Johnson has launched a multi-million pound low cost home ownership initiative, ‘First Steps’ which is aimed at helping Londoners onto the property ladder as well as more money to kick start the development of 3000 ‘affordable’ houses. 

Boris Johnson, Mayor of London
“London is taking the first major step and leading the way in tackling this housing crisis as we begin the process of helping thousands of Londoners who have been left stranded for so long in both boom time and now during the downturn. The money we are investing today is also a major shot in the arm for London’s development sector and the economy. As this rolls out thousands of construction sector jobs will be saved but more importantly the sector will emerge strong to build and grow London when the recovery comes.” Boris Johnson, Mayor of London

Simon Agace, Chairman, Winkworth
“Market sentiment has improved since January with potential ‘green shoots’ in many areas, but not all. Unquestionably, low interest rates both encourage investment in property and discourage leaving cash as a deposit. To switch mortgages means you get a lower percentage loan to value and a higher interest rate, and whilst this lasts it will act as a disincentive to move home – unless you have substantial cash. However, despite the troubles, there are still wealthy people in the UK, as it is such a large economy. Inhibition has also been caused by the fear of further falls in the market but maybe bricks and mortar has a higher resistance level than other investments, due to its nature, the fact that the UK will always be short of housing and that London will always attract worldwide interest. Drastically reduced price levels present an opportunity this spring, for those with cash. However stock levels have been decreasing. Investors looking for bargains will find, with the current trend, that there are less to be had.” Simon Agace, Chairman, Winkworth 

Tony Addinall, Chief Executive, Badger Holdings
“The last six rate reductions have had very little effect on the housing market and have not encouraged lenders to lend more freely. Thee Bank of England’s £75 billion asset buy-up scheme, shows that to kickstart the ailing economy it is going to take more than base rate reductions. It is encouraging that the Bank is finally recognising the key issues facing the market. Only time will tell, but let’s hope this injection has some sort of effect. This aside it wouldn’t take much to boost the flicker of life that exists in the market. All price indicators, including the recent Halifax house price index, are historical and most refer to completed transactions; real time figures are a lot more positive than being suggested. There has been a noticeable increase in activity this year.” Tony Addinall, Chief Executive, Badger Holdings 

Trevor Abrahamson, Glentree Estates
“It is an excellent time to buy property – there are savings of up to 25 per cent on last year’s prices. I believe we are probably almost at the bottom of the market and people need to be encouraged to make decisions now rather than wait until they feel more secure. Shared equity schemes, a short suspension of Stamp Duty and an insistence that the lenders use the funds available to lend to those who represent a good credit risk would help. With values so much lower than they were – and certainly going to rapidly rise in the next few years, sensible lending at 80 per cent is not a problem.” Trevor Ambrahamson, Glentree Estates, London NW11



Ivor Dickinson, Managing Director, Douglas & Gordon
 “We are already seeing how the market is being driven from the bottom end by first-time buyers. The drop in prices has encouraged parents, who are looking for a place to put their money in uncertain times, to help their children onto the property ladder. At the end of 2008, 78 per cent of flat purchases south of the river were done through deposits or financing from parents. The decrease in prices has also allowed people to buy in a street they didn’t think believable a year ago. The additional finance allows families to look for a property of higher quality and in a better location than what the average first time buyer could afford. 
“Many buyers are looking for a property with two equally-sized bedrooms with the potential to let the other room out to help with the mortgage repayments. Savvy buyers see this as a novel way of getting onto the property ladder when the signs of the market bottoming out become increasingly evident. 
“It has become increasingly difficult for first time buyers to get onto the property ladder as lenders are asking for a 20 per cent – 40 per cent deposit. This means people buying for the first time at an average of £250,000 in central London will require a £50,000 deposit – at least! What most people don’t realise is the market, in many ways, is returning to normal. A 20 per cent deposit is the way it always used to be before the credit boom took off ten years ago. 
“As the year progresses, lenders may become more lenient, but I think a minimum of 20 per cent deposit is here to stay for the foreseeable future.” Ivor Dickinson, Managing Director, Douglas & Gordon


VOICES FROM PROPERTY'S BACK BENCHES

It’s not only the captains of industry who have all the answers. offered two independent agents a shot at Gordon Brown


Russell Quirke
Russell Quirke, Quirk Deakin, Thurrock, Essex
“Call an election. Lose. Resign as Leader. Hide. In a culture that prizes its homes as ‘castles’ it is inevitable that if property equity diminishes then peoples’ motivation to spend also diminishes. The media forecast of house price falls in 2007 became a self-fulfilling prophecy, exacerbated by the Government’s lethargic attitude towards the Northern Rock crisis. Politicians stared wide-eyed in paralysis as the TV cameras filmed queues of savers snaking around the streets, desperate to withdraw their cash. Chucking cash at the banks and trimming VAT failed to stimulate the economy and cost billions. Raising the Stamp Duty threshold to £175,000 was too little, too late. Gordon Brown and his gaggle of inadequate sidekicks have led us to financial Armageddon. What now? Restore confidence in house prices, end media negativity, lend money. The Government’s incompetence in not contractually insisting that banks lend the bail-out funding to us is astounding. Cut the banks out. Set up a direct lending arm where taxpayers’ money is lent for mortgages and business. The banks have failed us. Let them fail. Real initiatives are needed, not headline-grabbing rhetoric announcing piddling sums to ‘assist’ first-time buyers. Lend deposits to first-time buyers; guarantee mortgage payments for first-time buyers; put the subsidies to good use at the coal face.” Russell Quirk, Quirk Deakin, Thurrock, Essex


Chris Lawson, Lawson Commercial
Chris Lawson, BA Hons, FNAEA, FICBA, Lawson Commercial, East Sussex
My practice is an independent professional firm in its 21st year. We deal in all aspects of commercial property, professional services, rent reviews, lease renewals and valuations. We are located in the heart of the Sussex Weald. We don’t have any large towns so our perception of the recession and our market is a little different to those in urban conurbations. The slow-down in consumer spending is having a marked effect on our high streets. We have many empty units and evidence of dramatic falls in rental values as landlords compete to attract retail tenants. There are plenty of shops with A2 use available but there aren’t any estate agents, mortgage brokers, building societies or banks looking! In the office and industrial market there is little demand, little supply. Does that mean the recession hasn’t yet hit these markets? There is demand from businesses looking for 3,000-10,0000 sq ft of office or industrial space; many on a freehold basis but these properties are not available. Interestingly, most claim not to need bank funding. There’s not much demand for leasehold property of any size. There are few small businesses looking to move into their first premises – they simply don’t have the confidence to move. Quite astonishing that interest rates have never been so low but I can’t detect any effect whatsoever on the demand for commercial property. I don’t perceive a major problem with money; it’s a serious problem of confidence. So Mr Brown, what do I want? Resign and call a general election. I can’t see any other way to stimulate confidence. Most business people have no faith in the Labour administration. The country needs an opportunity to speak its mind, to make a decision. We have seen euphoria and a positive attitude generated by Obama in America, a man with little business or political experience. He comes forward with lots of hope, bright ideas and has engendered confidence, even if he’s got one of the toughest jobs in the world. We need something similar. If Mr Brown won’t resign, could he make sure that the Chancellor does not introduce the proposed five per cent increase in business rates? They say that UK plc is made up of small businesses – but they are suffering badly. A major increase in business tax is unacceptable and will accelerate the decline. Take a small office suite of 1250 sq ft, for five or six people, rent of £10 per sq ft or £12,500 a year. If the rates go up to 48p in April, the business will pay £6,000 a year just for business tax. If the landlord can’t let his building, he pays empty rates – further penalised by the iniquitous system. Gordon Brown and his Cabinet are out of touch. They spend too much time in expensive limousines meeting captains of industry when they ought to meet real people struggling to survive running real businesses. In Wealden District over 90 per cent of businesses employ 10 people or less. Traditionally it has been an area of very high employment but an increasing number of firms are making redundancies as the recession tightens. Chris Lawson, BA Hons, FNAEA, FICBA, Lawson Commercial, East Sussex 

THE RECOMMENDATIONS TO GORDON BROWN TO KICKSTART THE UK PROPERTY MARKET:

1. Introduce a Government-backed Loan Guarantee Scheme on the top slice of a mortgage. 

2. Raise the threshold on Stamp Duty. 

3. Delay/abolish the introduction of HIPS and ditch the fine for marketing without a Home Report (Scotland). 

4. Reintroduce Mortgage Interest Relief At Source (MIRAS) and give first-time buyers a chance. 

5. A cash gift for first-time buyers to match as a deposit. 

6. Compel banks to offer 85 per cent loan to value on Buy To Let mortgages. 

7. Take Boris Johnson’s low-cost starter home initiative nationwide. 

8. Cut the banks out and set up a Government controlled direct mortgage lending arm. 

9. Do not increase business rates and protect small businesses. 

10. Resign from office and call a general election – let the British people make a decision!